Obama rejects Keystone permit, but leaves door open

By Puneet Kollipara

Updated 11:01 pm, Wednesday, January 18, 2012

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WASHINGTON - The Obama administration on Wednesday refused to authorize the Keystone XL oil pipeline, saying a congressionally imposed deadline left too little time to evaluate routes that would avoid an aquifer in Nebraska.

In rejecting the permit, however, the State Department said Canadian pipeline company TransCanada Corp. can reapply to build the link between oil sands in Alberta and Gulf Coast refineries.

TransCanada CEO Russ Girling said the company was disappointed but will reapply after mapping another route around the Ogallala aquifer, a source for drinking and irrigation water, later this year.

The pipeline has been an election year lightning rod across the political spectrum. Republican and industry leaders are painting the pipeline as creating jobs and boosting U.S. energy security. Environmentalists and many Democrats argue that the pipeline would promote a particularly polluting form of crude oil and could threaten water supplies.

President Barack Obama - faced with pressure from key constituencies on both sides of the issue - sought to lay his decision on Republican lawmakers.

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"The rushed and arbitrary deadline insisted on by congressional Republicans prevented a full assessment of the pipeline's impact, especially the health and safety of the American people, as well as our environment,'' Obama said. "As a result, the secretary of state has recommended that the application be denied. And after reviewing the State Department's report, I agree."

The State Department has authority because the pipeline would cross an international border.

Pipeline opponents vowed to oppose any effort by TransCanada to reapply, and congressional Republicans who supported Keystone XL vowed to renew their efforts on behalf of the pipeline.

"This is not the end of the fight," said House Speaker John Boehner, R-Ohio.

Republicans forced Obama's hand last month by including a Feb. 21 deadline for a Keystone decision in unrelated legislation to extend a popular payroll tax cut.

Blames the deadline

Assistant Secretary of State Kerri-Ann Jones said Wednesday that the deadline didn't provide enough time for studying alternative routes and prevented the department from recommending to Obama whether the proposal is in the national interest.

Obama said rejecting the permit "is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people."

Canadian Prime Minister Stephen Harper has pushed for the pipeline's approval, and Obama called Harper to convey the decision.

Obama faced the prospect of upsetting Democratic supporters no matter what he decided: Environmental advocates and some Democratic fundraisers oppose the pipeline, and some unions argue for it, saying it would create thousands of construction and manufacturing jobs.

Girling said he hopes the State Department can expedite approval of a new application in time to bring the pipeline online by late 2014, the company's previous target date.

Jones said she didn't know whether the department could meet that timetable. The department will have to do a new review of the application but possibly can use data from its review of the previous application, Jones said.

After addressing an energy summit in Houston, ConocoPhillips CEO James Mulva called the denial of the Keystone permit "a significant lost opportunity for the United States."

"If America turns away, others will step forward for this oil," Mulva said. "The oil sands are very attractive to the fast-growing Asian countries."

Keystone XL foes say its advocates inflate the number of jobs it would create. They argue the pipeline wouldn't bring new oil to the U.S. for years, instead rerouting already-imported Canadian oil from the Midwest to the Gulf Coast, where refiners could export the final product.